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What are the advantages, disadvantages and risks of using cloud accounting?

Cloud accounting is now becoming the norm for small businesses. What should a small business be aware of when considering cloud accounting software in terms of the benefits, drawbacks and risks?

Top voted answer
Tom Valcanis

Tom Valcanis, Copywriter at

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The obvious advantage to cloud accounting is that it's always on wherever you have an internet connection, and you can get managed support at almost any time.

Disadvantages are when it goes down, so does your productivity. With any cloud software, it's open to the risk of hacking and exposure of confidential information.

Aishah Mustapha

Aishah Mustapha, Content Marketer at

Top 10% Graphic Design Get quote

There are a lot of advantages in using cloud accounting. You can work and access your accounts anywhere with an internet connection and use it across many devices from desktop to mobile phone. Your accountant can access your files and collaborate with you too online.
Technically, you can just whip up your phone and have all your financial numbers at your fingertips. It is super handy for when you are out and about or when you need to make decisions on the fly. E.g. “What’s my current cash flow looking like?”
With cloud accounting, everything is stored in the cloud and you don’t have to worry about backing up or losing data while you work if the power goes off. You use less paper too as your documents are all online.
You don’t need to install your accounting system unlike traditional software. Just create an account online. Software updates are now automatic as opposed to manual updates if you use traditional software.
Cost wise, you usually pay a monthly fee for cloud accounting instead of a lump sum for a software, which translates to a smaller cost upfront, but it adds up over the years.
The downside is you need an internet connection to access it. Cloud accounting could be more expensive in the long run than just buying an off-the-shelf software.
With your data in the cloud, there’s always a small risk of a data breach or theft. But your provider such as Xero, Quickbooks or MYOB should have measures and processes in place in the event this happens. If there is a legal issue, there may be potential risks with data ownership.  

Steven Freeman

Steven Freeman at

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As long as you take all the necessary security measures with your logins and who has access to your data, generally the advantages far outweight any disadvantages.

If you and your accountant only require access, and you have low transaction activity then a traditional non cloud accounting system can be more than fine for basic needs.